Line chart showing that trade tensions weigh on international equities, comparing the YoY% change in global exports to the MSCI EAFE Index (YoY%).
Y-axis: Year over year percent change (%); X-axis: 1982-2022
The chart shows a correlation between the MSCI EAFE Index and global exports. When global exports were generally rising, from about -6.5% in June of 1982 to above 25.5% in late 1987, the MSCI EAFE Index rose from more than -18 in June of 1982 to a high of more than 86 by September 1986. Again, as global exports were rising from about -9% in March of 2002 to near 21% in December 2004, the MSCI EAFE Index rose from -23 in March 2003 to more than 52 in March 2004. And, again, as global exports rose from near -33% in June of 2009 to over 27% a year later, the MSCI EAFE Index rose from near -49 in March 2009 to over 52 in March a year later. Throughout this time period, with much volatility, the lines of trade and international equity performance have been generally related. By the end of September 2022, the MSCI EAFE Index stood at about minus 27% and global exports (Q2 2022 numbers) near 17%.
Sources: Bloomberg and Wells Fargo Investment Institute. Quarterly data from January 1, 1982 to September 30, 2022. Global exports: quarterly data from January 1, 1982 to June 30, 2022. YOY = year-over-year. The MSCI EAFE Index captures large and mid cap representation across 21 DM countries (excluding the U.S. and Canada),around the world. Index returns do not represent investment performance or the results of actual trading. Index returns represent general market results, assume the reinvestment of dividends and other distributions, and do not reflect deduction for fees, expenses or taxes applicable to an actual investment. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. Global exports are total world exports from the International Monetary Fund (IMF).
Equity securities are subject to market risk which means their value may fluctuate in response to general economic and market conditions and the perception of individual issuers. Investments in equity securities are generally more volatile than other types of securities. Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
Key Takeaways
- Global trade has been marred by regional disparities and China’s lockdowns, as well as inflationary impacts and fallout from the war in Ukraine.
- Trade volume is expected to increase by 4.7% in 2022, which should support export-oriented developed market equities.